Forget the green economy, this was a Budget for oil and gas

Budget 2012 witnessed the vanishing green economy. First, the Chancellor did not stint his support for fossil fuels, they receive over £3bn in new tax breaks. Second, he was “alert to the costs of renewables”, so no new support there to speak of. Third, a promise to lift the burden of the carbon tax for the largest service sector employers. Finally, green taxes will raise over £4.6bn, but we won’t see much of that spent on tackling fuel poverty or investing in green jobs and skills.

In a Budget that looked back to the golden age of fossil fuels, the Chancellor announced a new £3 billion allowance for deep oil & gas field exploration off the Shetlands, and a new allowance for small fields of £150 million. This was backed by “a new gas generation strategy” to secure investment in gas fired power stations.

Second, in a nod and a wink to the anti-wind farm campaign by 100 of his backbenchers, he blanked support for renewables and offered no reprieve in the cuts for the emerging solar power industry. No new announcements to back jobs in onshore and offshore wind projects.

Third, he assured the largest service sector employers, like retailers and hoteliers that he would scrap a new carbon charge if he couldn’t secure “major savings”. Major employers have clearly found the sympathetic ear of the Business Secretary. The Carbon Reduction Commitment (CRC) is due to cost service employers like Tesco £12 a tonne of CO2 from July 2012. The government will either greatly simplify this tax or scrap it. Osborne took a similar line as in the Autumn Statement about the government burdening businesses “with endless social and environmental goals – however worthy in their own right.”

Budget 2012 is unrecognisable from the vision the Aldersgate Group submitted to the Chancellor in a pre-Budget letter, of a “credible growth strategy that catalyses investment in renewables and energy efficiency, spurring the economic recovery.” The group said the UK was “falling behind in the green economy race, investing 0.15% of GDP in clean energy, compared to 1.4% in Germany.”

In brief, the Budget:

will raise up to £1.6bn a year from the new carbon tax, at £9.55 a tonne from April 2013.

Sticks to a commitment in the Autumn Statement to support energy intensive industries, but with just £20m a year relief from the Climate Change Levy.

Helps Combined Heat and Power installations by offsetting a Budget cut of a year ago with relief from the carbon tax (we think).

However, the cost burden of climate change policies on manufacturers rises to £165m a year by 2016. And as we write, it’s not clear where the £3.15bn subsidy to the North Sea oil & gas industry features in the Budget book. The oil & gas figures in our table suggest significant savings, not costs, so we’ll check this possible error?

2012-13

2013-14

2014-15

2015-16

2016-17

Total

Oil & gas

North Sea oil & gas: decommissioning certainty

-115

+245

+385

+340

+290

+1,145

Securing new oil & gas fields

-45

-90

+65

+30

+30

-10

Power generation

CHP relief from carbon tax

0

-45

-90

-115

-145

-395

Climate Change Levy – removing exemptions

0

+110

+125

+145

+165

+545

CCL: increasing levy relief to 90%

0

-15

-20

-20

-20

-75

Green taxes

Carbon Tax @£9.55 from April 2013

0

+615

+1,085

+1,330

+1,585

+4,615

A new gas strategy is promised for the autumn “to ensure investment in this sector comes forward.” Worries about the lights going out are exacerbated by delays to the UK’s only carbon capture & storage scheme at Longannet. No new clean coal investment will come forward until CCS technology is proven for coal. But there are no such such worries for gas, it seems. Meanwhile, on Saturday afternoon, the Energy Secretary, Ed Davey, slipped out plans to boost investment in gas-fired power stations that will allow them to emit high levels of CO2 until 2045.

Davey said that the emissions standard for gas powered stations would be 450 grammes of carbon dioxide emitted for every kilowatt hour of electricity generated. This is over 4 times the 2030 level recommended by the independent committee on climate change. He hopes for legislation in the next Session of Parliament. He may be in for a tough fight if he doesnt commit to capturing CO2 from gas-fired installations.

Finally, Craig Bennett at Friends of the Earth argued today that tax breaks for the oil & gas industry were shocking: after months of government complaining about subsidies to renewables, Osborne hands out billions of subsidies for deepwater drilling. This will do nothing to get us off the hook of high fossil fuel prices.

Written by Philip Pearson

Climate change, energy and transport are the main parts of my brief as a Senior Policy Officer in the TUC’s Economic & Social Affairs Department. Working out an effective trade union response to climate change has been a huge challenge, very mu…

One Response to Forget the green economy, this was a Budget for oil and gas

[…] Philip Pearson, Senior Policy Officer in the TUC’s Economic & Social Affairs Department: “Budget 2012 witnessed the vanishing green economy. First, the Chancellor did not stint his support for fossil fuels, they receive over £3bn in new tax breaks. Second, he was “alert to the costs of renewables”, so no new support there to speak of. Third, a promise to lift the burden of the carbon tax for the largest service sector employers. Finally, green taxes will raise over £4.6bn, but we won’t see much of that spent on tackling fuel poverty or investing in green jobs and skills.” See http://touchstoneblog.org.uk/2012/03/a-budget-for-oil-gas/ […]